Loading...
Memo - Business Improvement District f. _. PLANNING & ECONOMIC DEVELOPMENT Memorandum To: All Council Members From: Steve Mielke, City Manager Jim Hartshorn, Economic Development Coordinator 9. It January 23,2001 Oat: Subject: Business Improvement District Staff has been meeting with a committee comprised of property owners representing th Central Business District (CBD) to examine possible priorities and solutions for the CBD. The committee has outlined the following priorities for discussion at the next Council work session. 1. Create a private/public partnership to fund future projects within the CBD, as outlined in the attached funding proposal. 2. Create a back-entry building improvement funding mechanism (loans/grants) and assist the City's Inspections department to draft policies affecting the CBD. 3. Centralized dumpster pickup areas located in Blocks 100, 200, 300, 600 and 700 (possibly two locations). 4. Improved designated maintenance areas (any place that can be viewed from pedestrian areas, such as: municipal parking lots, walkways and alleys) - including litter, leaves, sand and snow removal. (Broom Program) 5. Acuisition and new construction of additional municipal parking lots. 6. Rehabilitation/reconstruction of existing municipal parking lots. 7. Maintenance of municipal parking system. . On way to possibly achieve the above items is to create a Business Improvement District (BID) steered by commercial property owners. See attached MIS Report. The HBCA has reviewed these items and receiv d th MIS report. They requested mor information. Th committee will review th se items and BID program at the January 30rd Council work session. If the Council supports the above priority items, the next step would be to set up a community meeting involving commercial property owners, business owners, HBCA m mbers, and Council members to review the priority items and BID information in more detail. If you have any questions, please call me at 939-1359. Attachments: .' . BUSINESS IMPROVEMENT DISTRICTS: TOOL FOR ECONOMIC DEVELOPMENT Business improvement districts, or BIDs, are used to finance services that improve the economic vitality of downtowns, Main Streets, and commercial strips. Formed in part as a response to declining levels of municipal services, more than 1,200 BIDs now exist in the United States and Canada, and the BID phenomenon is spreading to Europe, the Caribbean, Australia, and South Africa. A BID is based upon the benefit assessment district concept, which allows for an assessment on commer- cial property withm a defined geo- graphic area. Revenues from this assessment are returned to the defin- ed area to finance many services, including security, maintenance, marketing, economic development, parking, and special events. BIDs are generally formed with the consent and active participation of property and business owners. Local government can playa key role to encourage or discourage the creation of BIDs. Success depends on a delicate balance between private and public sector initiative. This report explores key elements of state and provincial BID legislatiofl, explains how a BID works, and provides strategies for supporting the efforts of property and business owners to form BIDs. Business Improvement Districts: Tool for Economic Development INTRODUCTION /\ \J To remain competitive in a dynamic marketplace, business districts are redefining themselves. Down- towns, Main Streets, and outdated commercial cor- ridors are discovering that unique multidimensional business environments can successfully capture a lu- crative market niche separate from conventional and new competitors such as large discount stores, on- line shopping services, and /lretail resort" shopping malls. Business improvement districts (or BIDs) can be a critical component of an overall revitalization strategy for a business district. BIDs make a business district competitive by providing a managed envi- ronment. As will be illustrated by case studies in this report, BIDs generate both the revenue and political will to keep commercial streets clean, safe, and eco- nomically vibrant. BIDs make a business district competitive by providing a managed environment. 0, ~ ' ~-=---";' A BID is a financing mechanism used to provide revenue for a variety of local improvements and ser- vices that enhance, not replace, existing municipal services. Based upon the benefit assessment district . concept, a BID is a self-imposed and self-governed quasi-municipal mechanism that must be supported by private sector business and property owners. Typically, BIDs are formed by an ordinance or resolution of local government. Decisions affecting BID revenues are usually made by a board consist- ing of private property and business owners. To de- liver day-to-day services, a BID will contract with a business district management organization. Manage- ment organizations are generally independent, pri- vate nonprofit organizations. In some cases, the M. Bradley Segal is president of Progressive Urban Management Associates (P.U.M.A.), a Denver- based consulting firm providing financial, marketing, and management services to advance downtown and community development and specializing in the creation of business improve- ment districts. Mr. Segal has consulted to BIDs and downtown management organizations in 11 states, Canada, and Jamaica, and was senior director of the Downtown Denver Partnership. Katherine Correll ofP.U.M.A. and Corinne Rothblum and Robert Dubinsky of leMA contributed to this report. management organization may be a department of local government. Since the first BID was established in New Or- leans in the early 1970s, the International Downtown Association estimates that more than 1,200 have been formed in business districts in the U.S. and Canada. The BID phenomenon has not been limited to large central cities-BIDs are now found in suburban busi- ness districts, rural Main Streets, and along automo- bile-oriented commercial corridors. The services and activities of BIDs are tailored to meet the specific needs identified by the local busi- ness community that funds them. The International Downtown Association has identified a number of general benefits that BIDs can bring about, many of which extend far beyond their actual service bound- aries. These benefits include: · Creating a cleaner, safer, and more attractive business district · Ensuring a stable and predictable resource base to fund supplemental services and programs · Providing nonbureaucratic and innovative management of a business district · Responding quickly to market changes and community needs · Helping to maintain and increase property values · Helping to improve sales and occupancy rates, thereby increasing a community's overall tax base · Giving a business district a distinct identity and making it more competitive with surrounding retail and business centers. A BID works in much the same way as a com- mon area maintenance (CAM) provision found in most tenant leases within suburban shopping malls and office parks. When a shopping center tenant pays a CAM charge, he or she is paying an extra fee for an enhanced level of services within the common 2 Management Information Service areas of the mall, which might include extra mainte- nance crews, mall security patrols, and cooperative advertising in local newspapers. Similar to uniform operating hours and merchandising standards, CAMs are standard practice for shopping malls, made possible by the fact that these properties are generally held and managed by single owners. A BID is a CAM for downtown. Unlike a shop- ping mall, downtowns, Main Streets, and older com- mercial corridors have multiple owners, making the lease covenants found in a shopping mall problem- atic. A BID provides a mechanism by which all prop- erty and/ or business owners must pay an assessment to support services in the common areas of a busi- ness district. Similar to a mall, these services might include uniform cleaning of sidewalks, extra secu- rity patrols, and collaborative marketing and events (see sidebar). Once a BID is formed, all property and/ or busi- ness owners are required to pay to support it; how- ever, unlike a mall, a BID allows property and business owners to retain their own individual stan- dards of operation. This is an important distinction, since many property owners and merchants remain in downtown or on Main Street in order to be entre- preneurial and not be constrained by the rules and regulations of a mall. Ultimately, it is the collective energy of diverse entrepreneurs that gives down- town, Main Street, or a commercial corridor its vital- ity and competitive advantages. ,'1S'" '\ \\~ , Can a BID Work in Our Community? Despite their demonstrated advantages, BIDs are not a solution for every community. Many communities have tried to establish BIDs only to fail; sometimes the result is a political stigma that prevents another attempt at creating a BID for a decade or more. Be- fore a business district embarks on the process of forming a BID, generally the following elements must be in place: Private sector leadership. BIDs are most successful and effective when the process is driven by private sector leaders within a business district. A BID in- volves the imposition of an assessment, or tax, upon property and/or business owners. Peer-to-peer en- couragement is the most effective way to "sell" the BID concept. Private sector leadership must be evi- denced within a business district, either through an existing business organization or through an infor- mal network of key stakeholders. Supportive local government. Local government is best cast as a low-key but dependable supporter in the drive to form a BID. Local government can pro- (. Business Improvement Districts: Tool for Economic Development 3 vide resources, including information, money, and staff expertise. Many BIDs have been killed by an overzealous government that is skeptically viewed by property and business owners as too quick to in- crease taxes. On the other end of the spectrum, a dis- interested local government can also kill a BID formation effort by fueling concerns that existing government services will be withdrawn. Staff and financial resources. Formation of a BID is a people intensive process that, depending upon the business district, can take from 9 to 18 months. Stages of forming a BID include the initial feasibility study, development of a service plan, and a political cam- paign to carry the BID through a petition process and/ or local government approval. Financial re- sources are needed for computer hardware and soft- ware, marketing materials, consultants, legal counsel and unforeseen expenses. Staff support is required to compile property and business owner databases, create marketing materials, manage consultants, and coordinate volunteers. o Public/private partnership. The success of a BID for- mation effort depends on a viable public/private partnership. Formal or informal, the partnership should aim initially to include all interests in the business district. Private sector leaders should be out in front of the BID formation effort but a supportive local government should be visibly at the table. With the preceding elements in place, a commu- nity can begin investigating the formation of a BID. About This Report Q The following sections of this report are intended to provide step-by-step guidance for creating a BID. The first section reviews state or provincial legislation that allows the creation of a BID. Enabling legisla- tion in the United States and Canada is different in each state and province, yet has standard processes and benchmarks that can affect the overall BID for- mation strategy. Becoming acquainted with enabling legislation is the first step in considering a BID. The second section provides detailed steps for guiding a successful BID formation process. These suggested steps are drawn from practical experiences in forming BIDs in communities throughout North America plus suggestions from the International Downtown Association, the leading membership or- ganization representing BIDs and BID managers. The third section discusses implications for lo- cal governments and provides recommendations for managers and elected officials who want to facilitate the BID formation process. Finally, a series of case studies illustrates the application of BIDs. Case studies include conven- tional downtowns, suburban business districts, com- mercial corridors, and international applications. GETTING STARTED: REVIEWING STATE OR PROVINCIAL LEGISLATION According to the International Downtown Associa- tion, 49 states and most Canadian provinces now have enabling legislation in place that allows local governments to form BIDs. BIDs go by many names, including · Business improvement zone (BIZ) · Parking and business improvement area (PBIA) · Special services area (SSA) · Special improvement district (SID) · Self-supported municipal improvement district (SSMID). What these districts have in common is the abil- ity to assess local businesses or property owners to raise funds for localized programs, services, and improvements. In this report, all such areas with similar assessment mechanisms will be referred to as BIDs. To determine whether a BID fits in your com- munity, start by reviewing the enabling state or pro- vinciallegislation. The BID formation parameters within the enabling legislation will dictate the length, type, and political nature of the process. Process for Establishing the BID The place to start in reviewing BID legislation is to determine the process for establishing the BID. Most states provide for a two-step process that begins with evidence of property owner support that is then sub- mitted to the city councilor board for consideration. The council conducts public hearings and then may form the BID through an ordinance or resolution. For those states that require an affirmative peti- tion process, the requirement is generally that a ma- jority of property owners sign petitions supporting the BID. Majorities vary from state to state and are not always 50 percent plus one. "Majority" can also apply to one of several measures, including · Assessed value · Acreage · Assessments to be paid- · Number of property owners. The type of majority will affect the BID forma- tion process from the very beginning. For instance, BIDs that require petitions from property owners representing a majority of assessments to be paid might depend upon a small percentage, even less than 10 percent, of the actual number of property owners. In states that do not require an affirmative peti- tion process, a BID may be formed unless a significant percentage of property owners protest, us- ing whatever the relevant measure is (number, acre- age, value, etc.). Among these states, the percentage 4 Management Information Service defined as significant ranges from 30 to 50. Generally, it is easier to avoid a protest than to secure majority support to form a BID; however, a broad -based petition effort in either scenario will build a stronger political foundation for the BID. In addition to BID legislation requirements, many states now have tax limitation amendments in their constitutions that affect BID formation. A tax limitation measure may require an additional step- such as an election-following the petition process and public hearings. Tax limitation elections can be tricky, with a number of idiosyncrasies, including specific voter registration, notification, and polling requirements. Often, more stakeholders, including residents and tenants, can participate in a tax limi- tation election than the property owners that gener- ally form BIDs. Although tedious and time-consum- ing, the tax limitation election can strengthen the BID by validating it among a broader business district constituency. An inclusive effort to design and form a BID can also help lay the political groundwork for the subsequent tax limitation election. S rvice Plan Options State and provincial legislation should be checked closely to ensure that a variety of service options are available to fit the needs of the business district. Ser- vice options range from environmental management (security, maintenance, and human services) to eco- nomic development (marketing, promotions, events, business recruitment) to capital improvements (streetscape, parking, public art). Service options under BID legislation should be carefully contrasted with options available for other types of special dis- tricts, including capital improvement bonds and tax increment financing. A lack of flexibility and clarity has led some states to revisit their BID laws. Generally, a BID should be employed for man- agement and marketing functions and not for infra- structure and capital improvements, although sev- erallarge cities, including Houston and Philadelphia, have had recent success in financing capital improve- ments through their BIDs. Assessment Options "What is this going to cost me?" is generally the first question that a property owner will ask about a BID; therefore, it is critical to become familiar with assess- ment options under the state or provincial law. Many states prescribe the method of assessment, but some allow for local flexibility. Most BIDs base their assessments upon assessed value. In most cases, assessed value provides a fair evaluation of the market value of a property by a disinterested and qualified third party-the local assessor. Assess- ed values are updated periodically and an appeal process is built into the existing valuation system. Assessed value tends to provide an equitable basis for conveying benefits from BID services to a prop- erty value adjusted to the marketplace. A disadvantage of using assessed value is that when property values fall, the assessment may have to be raised to maintain service revenues. In a few places, such as California, assessed value cannot be used as the basis for BID assessment because of inequities inherent in the assessed valua- tion system. Alternative assessment options include lot and building square footage and linear street frontage. Most important, the assessment should relate to the nature of services and benefits provided. Some services, such as maintenance, might be concentrated on the street level so that more benefit is conveyed to street level uses. Other services, such as market- ing and economic development, will generally benefit all properties, and their costs can be distrib- uted throughout the service area. Most recent surveys find that annual costs of BID assessments range from $0.10 to $0.20 per square foot of building and land or 4 to 10 percent of existing property taxes.1 ~ it' Governance Since it is ultimately created through a local govern- ment ordinance or resolution, a BID is usually a quasi-governmental entity. Most BIDs must then have their annual budget reviewed and approved by the local government. This requirement can be a dis- incentive to some property owners who are skepti- cal and mistrustful of local government. To maximize private sector influence and con- trol, most enabling BID laws provide for the forma- tion of a property and business owner advisory board. The advisory board will generally have au- thority to submit yearly assessments and budgets to the local government. Many communities further clarify the relationship by establishing that the local government cannot change or interfere with advisory board recommendations unless there is evidence of mismanagement or malice. BIDs may designate advisory board seats by ge- ography, business, and property type to ensure that the business district's interests are well represented and served. . A clear definition of the role and authority of a BID advisory board is critical, particularly for prop- erty owners, most of whom are receptive to the con- cept that BID funds are governed by those who pay. Treatment of Noncommercial Properties Many state and provincial BID laws will exclude cer- tain types of property, such as residential or agricul- tural, from BID assessments. If the locality has the flexibility to determine Business Improvement Districts: Tool for Economic Dev lopment 5 ~ eligible classes of property, both functional and po- litical considerations should be factored in. On the functional side, benefits from services must be de- mon- strated to all classes of properties that will be assessed. Therefore, it might be unwise to impose assessments on residential properties that do not di- rectly benefit from business marketing and other commercially oriented programs. Politically, some types of properties are easier to qualify for BID assessments than others. For in- stance, residential uses such as rental apartments are generally considered income-producing to the owner while owner-occupied condominiums are not. It might be more practical and politic to include rental apartments while exempting condominiums. In most states and provinces, government- owned properties are excluded from BID assess- ments, yet government properties are often the subject of intense debate in the BID formation pro- cess. Although not compelled to pay an assessment, many governments will participate financially in a BID through a financial contribution or by contract- ing with the BID for services. Government can justify participating in a BID since publicly owned property benefits from BID ser- vices in much the same way as privately owned prop- erty. Making a business district more secure, clean, and vibrant can enhance the work environment for government employees and customers. At the same time, government participation can boost the BID for- mation effort by demonstrating civic support for the BID and cementing the foundation for a true pub- lic/ private partnership. A precedent for broader government participa- tion in BIDs was established by the U.S. government in 1996. The General Services Administration (GSA) established a uGood Neighbor Program" that encour- ages the federal government to contract with BIDs for services that benefit federally owned property. Many BIDs, including those in Memphis and Phoe- nix, have subsequently completed formal memo- randa with GSA. Typical service contracts provide payment for BID maintenance and security services. The treatment of nonprofits is usually left to the discretion of the locality. A common practice is to classify BID assessments for nonprofit organizations in the same manner as their local property tax sta- tus. The influence of nonprofit organizations should not be discounted in the formation of a BID. In EI Cajon, California, a local church played an impor- tant role in brokering key agreements between busi- ness factions to keep the city's recent BID formation process intact. In the process, the church committed itself ~o paying its full assessment. (\ Ul O<'-~- '" ~ Sunset Provisions Many state and provincial laws establish terms or sunset provisions for BIDs. These provisions will re- quire that the formation process be repeated to re- new or lengthen the life of a BID. Sunset provisions can also be important tools to gain support for a BID. Generally, a BID is most difficult to sell during its initial formation because of local uncertainty about the concept. A set term for the BID offers more certainty and control than a per- petual obligation. A minimum of five years is rec- ommended as a reasonable term to establish a track record for the BID and amortize the time and cost associated with its renewal. Of more than 1,200 BIDs that have been estab- lished, only a handful have been dissolved. This sta- tistic is perhaps the most convincing proof that BIDs are successful tools to improve business districts. STEPS FOR FORMING A BID The following process is suggested for establishing a BID in a business district. Depending upon the political and economic dynamics of the community, this process can take up to a year and a half. It is best to have the critical elements in place before try- ing to form a BID-private sector leadership, sup- portive local government, staff and financial resource sources, and the foundation for a viable public/pri- vate partnership. The following steps provide sug- gestions for building these essential ingredients if they do not already exist. Timing Timing is critical in the BID formation process. It is best to uback in" to a BID formation timetable by first establishing procedural and legal timing require- ments. In most states, there is an annual deadline by which new assessments can be submitted to local assessors. This becomes the deadline for the BID for- mation process, and all steps in the process must be completed by this time. For example, if an assess- ment submittal deadline is August 1, it might be nec- essary to deliver petitions to the local government in June to meet public hearing requirements. The petition campaign to form the district might then need to begin by early April, and the consensus- building process in January. For st~tes with tax limi- tation measures, the timetable should also accomo- date timing and procedural considerations for assess- ment elections. The economic and political environment should also be considered before the BID formation process. It is often easier to form a BID to respond to an eco- nomic challenge or defining event in a community's evolution. Downtown Atlanta, for example, formed its BID in anticipation of the 1996 Olympics. The for- mation process should not take place during local elections so that the BID does not become a defining issue for councilor mayoral candidates. 6 Management Information Service Forming a Cor L adership Base To move forward, a BID must have a private sector champion or set of champions. Establishing a private sector leadership base can be tricky, since visible leaders often carry baggage that can be disruptive to the BID formation process. It is best to identify several private sector leaders who are committed to advancing the fortunes of the business district, are reasonably well connected in the community, and are representative of the various sectors that will be asked to pay assessments. The core leadership group can be organized into a formal steering committee that guides and monitors the BID formation process from the beginning. Through the process, the steer- ing committee evolves into the sales team that mo- bilizes property and business owner support. A BID steering committee should have represen- tation from existing business or merchant organiza- tions. Ideally, the BID concept is consistent with the goals and objectives of existing organizations-after all, a BID is a likely revenue source for continuing or expanding existing programs. However, person- alities and politics within existing organizations may trigger concerns that a BID will replace them or erode their membership base. These concerns are usually premature and will be assuaged as the BID takes shape. In the beginning, it is best to recruit repre- sentatives from existing organizations who will rep- resent collective interests, as opposed to more parochial interests. Some business districts suffer from having frag- mented, competing, or ineffective organizations. A new public/private initiative to form the BID might be helpful to avoid alienating various factions. These new associations can either be informal or formal, depending upon the local political dynamics. In Sac- ramento, California, a successful BID effort was led by a new group of business, city, and civic leaders that called itself the Downtown Sacramento Partner- ship. Initially an informal leadership group, the part- nership now manages downtown Sacramento's BID. Several existing business organizations and special service districts were consolidated into the partner- ship in the process. If there is difficulty in identifying a core leader- ship group or developing enthusiasm for the BID formation effort, there are several ways to jump-start private sector leadership and build initial momen- tum, including Business district summits that focus on publici private methods for improving the local economy Panels featuring BID managers and board mem- bers from comparable cities who share success stories and offer inspiration Organized field trips to comparable cities to wit- ness how BIDs operate in comparable business districts Testimonials from local corporate or institutional property owners who also own properties in other cities with successful BIDs . BID feasibility studies undertaken by consult- ants who specialize in the field. The International Downtown Association can be a valuable resource in identifying ways to educate and organize private and public sector leaders to the value of BIDs. Financing the BID Formation Process There are many costs associated with the BID for- mation effort, including database development, con- sensus building, service plan development, legal services, and marketing materials. BID formation costs range from about $25,000 for small or compact business districts to as much as $250,000 for large downtowns. Local government is usually the first stop in the search for BID formation funds; however, it is best to establish a public/private partnership from the beginning by securing BID formation funding from both public and private sources. Single source fund- ing, either public or private, can backfire by creating the perception that the BID is the agenda of one spe- cial interest. Options for funding BID formation costs include . Challenge grants from the local government that encourage private sector financial involvement . Soft loans, either public or private, against the future proceeds of the BID. Most state and pro- vincial BID laws allow formation costs to be paid back by assessments once the BID is established. If the BID is not formed, then the soft loan is written off as a grant or contribution. . Community development block grant (CDBG) funds are available for many services commonly provided by BIDs, including economic develop- ment and public safety. A BID formation effort may be eligible for CDBG funds in the form of challenge grants or soft loans. . In-kind contributions in the form of staff and equipment from local governments, businesses, universities, and other civic organizations. . Establishing a Study Area Boundary The BID formation debate often becomes contentious once boundaries are drawn on a map. Initial BID boundaries should be drawn in the context of a "study area," with the message that the eventual BID may be formed within all or part of the study area. As the BID formation process proceeds, it is usually easier to reduce the size of the study area than to add to it. . ~. Business Improvement Districts: Tool for Economic Dev lopment 7 Several considerations should dictate the even- tual size of a BID, including Local zoning designations. In a conventional BID, business and commercial areas should be included, residential areas excluded. It is also important to respect zoning as it applies to den- sity or uFAR" (floor area ratios). Areas with higher density development can derive more potential benefit from BID services than areas with lower densities. · Land use considerations. Many business dis- tricts have defined boundaries set by streets, parks, or other physical features that divide the business district from residential neighborhoods or other use districts. Political support. Sub-areas of a business dis- trict might not support the notion of a BID and might become a source of active opposition. These sub-areas should be excluded if they can become harmful to the overall BID formation effort. Common sense. Eventual BID boundaries will be directed by both the functional requirements of the business district and the path of least resistance as determined by the active support of property and business owners. 0,--, ~ /,)'!r At the end of the BID formation process, the final BID boundaries might be much smaller than the initial study area. In the long run, this can benefit the community by providing a visible pilot program that clearly demonstrates the benefits associated with the BID. Many BIDs expand over time as initial naysayers and other neighbors see the results and want to be part of the improving business district. Q. t ~ :, ,:- .~" Creating a Database Perhaps one of the most overlooked steps in the BID formation process is the creation of a comprehensive real estate and business database. The database is the most important technical tool in the BID formation. Developed early, the database can streamline the process. Delays in the development of the database can stall BID formation and jeopardize the process. At a minimum, the BID database should have the capacity to accommodate the following fields: Property characteristics, including the assess- ed value, lot and building square footage, and frontage Ownership characteristics, including name and address of the owner, contact person, list of tenants, and property managers Petition information, including the name, ad- dress, and phone numbers of the person(s) who can legally sign a petition; inclination to support or oppose the BID; and a chronology of contacts with the property owner or representative. As far as possible, local sources should be used to retrieve this information. Sources include local assessors, planning departments, private property information companies, and real estate brokers. Other existing assessment districts can also be a valu- able source of data. Much of the database will need to be constructed through pure hustle, requiring a sleuthing staff and interns. To construct and validate a database, thor- ough site surveys should be undertaken. Property owners should be given the opportu- nity to verify BID data through a uniform data verification process. Local government building and planning departments can be helpful to resolve da- tabase disputes. The database will be used in several ways: · Property owner and business notification throughout the BID formation process (the BID database is the primary stakeholder mailing list) · Development of the BID assessment methodol- ogy as several assessment scenarios are run through the database to determine BID costs and benefits · Petition tracking system as the database keeps a running count of supporters and opponents. There are several software options for a data- base, ranging from common spreadsheets (Lotus or Excel) to sophisticated database managers (Filemaker Pro). It is most important to match a database soft- ware with local capabilities and hardware. If data- base management staff change during the BID formation process, a seamless transition is necessary. Building Consensus for a BID Service Plan A participatory process that involves property own- ers, businesses, and civic leaders is critical to edu- cate these key stakeholders about the BID and to build ownership in the final product. Those who will be asked to pay BID assessments should be involved in the process of designing it. A good starting point in building consensus is to educate property and business owners on BID ser- vice options. They can be introduced to these ser- vice options through a variety of processes that seek their input. It is important that the first exposure to the BID concept include opportunities for stakehold- ers to establish priorities rather than react to a plan. If the lead team presen ts a plan before the general fact-finding process, stakeholders will suspect a hid- den agenda or conspiracy. Effective ways to gather stakeholder input include Focus groups. Focus groups are a results- oriented method to obtain considerable input in 8 Management Information Servic . a short period of time. Focus groups generally consist of small groups of 8 to 15 property and business owners selected by industry type and/ or geography. Focus groups should be used to review BID service options and to gauge the willingness of stakeholders to pay an assess- ment. One-on-one meetings. For key players in a busi- ness district, nothing is more effective than a one-to-one meeting to discuss BID options and ' issues. Meetings should be held on the home turf of the property or business owner. Direct mail surveys. To broaden the level of in- volvem~nt beyond focus groups and one-on-one meetings, direct mail surveys can be useful. Data from a mail survey is generally less reliable than face-to-face methods because a mail survey is less effective in describing the BID concept and responding to pertinent questions. F.orums or town hall meetings. Following a se- nes of focus groups, one-on-one meetings, and/ or direct mail surveys, business district forums can be useful to broaden the range of stakehold- ers exposed to the subject. At open forums, it is important that property and business owners who support the BID be present to offer re- sponses to their peers' questions as well as anec- dotal endorsements. The preceding processes are basic to consensus building and can best be facilitated by an outside consultant or other qualified party who has no financial stake in the creation of the BID. If meetings are facilitated by a city or business district associa- tion staff member, self-interest or the perception of self-inter~st may produce biased results. Creating a Fair Assessment Methodology In considering a BID, a common instinct is to start by calculating the revenue that could be assessed from a business district. The assessment methodol- ogy should be service driven, however, rather than revenue driven. BID services should first be identified through a consensus process that establishes property and busi- l\ess owner priorities. A budget can then be devel- oped for the desired services with the assessments resulting from the budget. If the proposed assess- ments are too high, property and business owners need help streamline the service plan. A fair assessment methodology will distribute the costs and benefits of BID services equitably to properties and businesses. The nature of the services will have a strong influence on the design of the as- sessment methodology. For instance, the direct costs of maintenance services are often allocated to prop- erties within the area where they are provided, since they visibly improve the affected areas. Costs for dis- trict-wide marketing, on the other hand, can be allo- cated throughout a BID on a pro-rata basis since each property, regardless of its location, is expected to benefit. Assessed value is the most common variable for BID assessment methodologies. In most states, the assessed valuation system provides a fair estimation of value with a built-in appeal process. In theory, successful BID services will improve the business district environment, contributing to an eventual enhancement of sales and property values. Assessed value as an assessment variable becomes a logical method of distributing BID benefits to participating properties. Other variables, including building and lot square footage and street frontage, are also com- monly used in developing assessment methodolo- gies. These alternative variables can be useful in distributing the costs of services that benefit a con- centrated area or public amenity. In California, square footage and frontage variables are required because of inequities inherent in the assessed valua- tion system created by Proposition 13. Sometimes BID services and benefits are not dis- tributed equally throughout a business district be- cause the needs of subdistricts differ. These areas can be accommodated through the creation of "benefit zones" that are used to allocate the direct cost of ser- vices to properties and businesses within a certain geographic area. One unified BID can then have sev- eral benefit zones, each of which pays a different level of assessment based upon the services it re- ceives. As a general rule, it is best to keep the assess- ment methodology as simple as possible. The less complex the methodology, the easier it is to explain and justify. . . Resolving Governance Issues While BIDs are generally described as being gov- erned by those who pay, the typical governance structure of a BID includes the local government elected councilor board, a BID advisory board, and a business district management organization. If the BID is to work well and win local support, its governance structure should be designed to allow ratepayers, Le., property and business owners, to govern and implement services while local govern- ment monitoring protects them from the isolated case of mismanagement or fraud. The functional requirements of a BID gover- nance structure include Local government elected council or board. Most state laws empower local city councils to approve annual budgets, appoint BID advisory . Business Improvement Districts: Tool for Economic Development 9 r \ boards, and monitor day-to-day operations through a direct contract with the management organization or an intergovernmental agreement with the BID. · BID advisory board. Most state laws allow for the formation of a ratepayer advisory board to recommend budgets and assessments to the city council. BID advisory boards also evaluate the performance of the management organization that delivers day-to-day services. · Management organization. A business district management organization delivers the day-to- day improvements funded by the BID according to a contract with either the BID advisory com- mittee or the local government. In most cases, the management organization is a pre-existing, nonprofit, private-sector organization. o The preceding entities are closely related in the eventual operation of the BID. Their inter-relation- ships can be confusing and difficult to explain to property and business owners. It is imperative that the governance and management relationships be clearly defined within the BID service plan. Several safeguards can be employed in design- ing a BID governance structure to maximize account- ability to both local government and ratepayers: The composition of the BID advisory board should be spelled out in a service plan (see sidebar on this page). Advisory board seats should be designated by geographic sub-districts, indus- try types, and/ or large and small business inter- ests within the BID. The group that pays the most assessments, such as property owners, should have the greatest representa tion. · The city council should adopt a policy that it will not unilaterally change a BID budget submitted by the advisory board. An unsatisfactory budget will be sent back to the advisory board. · The local government should be represented on the BID advisory board in an ex-officio capacity or, if the local government provides a financial contribution, in a voting capacity. U.,-~~ , t;<ti .~ Building and Mobilizing Support As determined by state or provincial legislation, BIDs are generally formed through a public process that leads to the consideration of an ordinance or resolu- tion to establish the BID by the local government councilor board. Prior to council consideration, most BID laws require the evidence of property and busi- ness owner support, demonstrated through the sub- mission of supportive petitions or the absence of a substantial protest. In either case, the process should be viewed as organizing and implementing a politi- cal campaign. . The key to the success of the BID formation ef- fort is the effective mobilization of property and busi- ness owners to sell it. Support for BIDs is built by property owners convincing other property owners and businesses convincing other businesses-a peer- to-peer sales strategy. The process outlined in this report can help build a strong stakeholder support coalition from the beginning. The initial BID steer- 10 Managem nt Information Service ing committee, which includes the core group of pri- vate sector leadership, can be expanded as the con- cept advances through consensus building and plan development. ,To prepare for a BID petition drive, the BID steer- ing committee or "sales team" should evaluate the inclinations of each property or business owner. Property and business owners should be classified as follows: Support or leaning support-there has been di- rect communication with the property or busi- ness owner and he or she has indicated support for the BID concept. Undecided-the property or business owner has been contacted and is undecided on his or her level of support. Oppose or leaning opposed-the property or business owner has been contacted and he or she has indicated opposition to the BID concept. Unknown-the property or business owner has not been contacted. For the purposes of forming the BID through a petition process or avoidance of a protest, support should be drawn from those property and business owners classified as supportive, leaning supportive, undecided, or unknown. Limited time and energy is better applied to securing supporters than to trying to win over those known to be opposed. In the worst case, extra efforts to sell opponents can incite them to organize to stop the BID. Incentives and friendly competitive pressure should be considered to help motivate property and I business owner sales teams. Sales team members should be assigned to specific property and business owners and then monitored on their progress. Dur- ing the heat of a petition process, weekly sales team meetings are not unreasonable. Marketing materials can be helpful tools for sell- ing the BID concept. In general, they should be fact- based and not extravagant or slick. Expensive-look- ing marketing materials can give rise to theories that a special interest group, private or public, is push- ing the BID. Marketing materials can include Newsletters that provide summary information on the BID, including testimonials and data from comparable districts · Talking point summaries for property and busi- ness owner sales team members to help them orchestrate a pitch with consistent messages Videos that illustrate problems to be remedied by the BID-the successful BID formation pro- cess in the Los Angeles Fashion District was aided by a video of trash, graffiti, and other urban problems viewed from a conventional hand-held video camera · Informational panels or forums produced for property and business owners. These panels can include BID managers and stakeholders from comparable communities to offer testimonials and provide overall objective inspiration. A media relations strategy should be developed before the BID formation petition drive or other pub- lic process is initiated. It is best to develop a low key posture with the media and not attract attention that might rile opponents. Editorial board meetings are useful to educate the media on the objectives and mechanics of a BID. BID supporters should also des- ignate one or two key spokespersons who can re- spond to media inquiries. Spokespersons should know the BID formation process well and, if possible, be direct stakeholders such as property or business owners. t Preparing Elected Officials Ultimately, with supportive petitions or lacking sufficient protests, the proposal to establish the BID will be submitted to the council or other governing body. In virtually every case, there will be some level of opposition or misunderstanding of the process among citizens or elected officials. It is critical that local government officials be informed and clearly understand the dynamics of the BID. Preparation of the local council should begin during the initial steps of the BID formation process. Appropriate members of the council should either be invited or consulted for the core leadership group. Councilmembers should be involved in the consen- sus-building process and be included in focus groups or one-on-one meetings. Periodic updates and briefings should occur throughout the process. It is often important to distill the BID message into two or three overriding themes. Positive BID themes include . · Leverage-BID funds are an important source of leverage for scarce public sector dollars · Private sector initiative-a BID is formed only with the participation and consent of affected property and business owners · Not a conventional tax-most BIDs are self-as- sessed and self-governed by affected property and business owners · Revitalization of economy and image'-a revital- ized business district can benefit the community by improving its image and eventually increas- ing sales, values, and tax receipts · Public/private partnership-the BID can be an important step to initiate or build a viable pub- lic/private partnership to revitalize a business district. . Business Improvement Districts: Tool for Economic Development 11 ?'"'\ Beyond political messages, forming a BID pre- sents several program and resource implications for local government that elected officials must also un- derstand. These implications are discussed in the fol- lowing section. Considerations for start-up Assuming that the effort to establish the BID is suc- cessful, several key issues generally need to be re- solved in the start-up phase: Organizational structure. BIDs, as a quasi-munici- pal entity, rarely deliver day-to-day services. More commonly, BIDs will contract with a nonprofit pri- vate-sector management organization to provide ser- vices. The overall business district management structure should be clarified prior to establishing the BID. Will the BID contract with an existing organi- zation or should a new public/private partnership be established? Start-up funding. Typically, there is a three- to nine- month lag between the local government's establish- ment of the BID and the availability of funding through BID assessments. During this time, BID start-up functions include resolving organizational structure issues and preparing for programs. To ~ finance these activities, many BIDs borrow against ~"J future proceeds from the local government, banks, or other private businesses. Start-up funds should also be included in first-year budgets and business plans. Ex;ecutive director search. Good BID managers are difficult to find. They must typically be excellent jug- glers, balancing a wide variety of programs and poli- tics. In addition to the rare candidate with business distI1~t management expertise, relevant skills and backgrounds include real estate, retail, and planning. Excellent communication skills, both written and interpersonal, are a must. There is currently no ac- creditation program for BID managers, but the In- ternational Downtown Association and the National Main Street Center are good resources for recruit- ment. r~ ~ Operational planning. To expedite the delivery of services, operation planning is helpful during the start-up period, before the receipt of BID funds. Street level services, such as maintenance and secu- rity, are the most visible and should be the focus of early planning. Questions to be decided include whether services should be let to a private contrac- tor or delivered in-house by the management orga- nization. Equipment and capital needs should also be identified to ensure enough lead time for order- ing or production. IMPLICATIONS FOR LOCAL GOVERNMENT Local government support is crucial to the success- ful creation of a BID; however, local government of- ten walks a tightrope between overzealousness and indifference. Before embracing a BID, local govern- ment leaders should be aware of the key political and resource allocation issues involved in the BID for- mation process. 12 Management Information S rvice Passive and Active Involv ment Strategies' ' Local government often initiates the community dia- logue to form a BID, since BIDs generally help imple- ment local economic development and civic agendas. Advantages of BIDs ,to local governments include the following: Creating a self-sustaining mechanism to main- tain, manage, and market new investments in civic infrastructure, such as streetscaping or re- development projects Forming a unified private sector voice Leveraging supplemental services to mitigate declining municipal budgets Advancing revitalization strategies for business districts that lead to increases in sales revenue, property values, and, eventually, tax receipts. Local government can be the initial catalyst for a BID in a variety of passive and active ways, de- pending upon the political dynamics of the business district. Behind the scenes, local government can be an important resource to organize and capitalize the formation effort. Methods of persuasion range from delicately educating key stakeholders on the benefits of BIDs to issuing formal challenges. For instance, local governments commonly require that a BID be formed to maintain and manage a substantial public infrastructure investment in a business district. It is best for the local government's visible in- volvement to diminish during the BID formation process. In the end, a BID is formed by property and business owners through a peer-to-peer sales effort. Heavy-handed government involvement can da~- age the credibility of the BID-it ceases to be a pn- vate sector initiative. Such restraint is difficult for local governments, which often initiate and partially fund BID formation efforts, particularly when the development process takes an unforeseen turn. It is best to stay focused on the long term benefits of a successful BID-first it needs to happen, later it can be adjusted. Often, the most difficult challenge for local gov- ernment is the notion of letting go. Forming a BID will dilute the power and influence of a local gov- ernment within a business district. The private sec- tor becomes empowered with its own financial resources and staff. While it is generally more pro- ductive to change the nature of civic relationships from dependency to leverage, the balance of power will change permanently. Local government should. anticipate and accept this shift before supporting the BID formation process. Bas -Lev I-of-Service Agre m nt One of the most persistent concerns of property and business owners throughout the BID formation pro- cess is the BID's potential impact on existing munici- pal services. They want the BID to enhance local ser- vices, not supplant them. To ensure that local services are not reduced during the life of a BID, base-Ievel- of-service agreements are common. In fact, many state BID laws require local governments to develop them. A base-Ievel-of-service agreement is a policy or contractual commitment by the local government to the BID that existing services will not be affected by the creation of the BID. In form, base-Ievel-of-service agreements range from a detailed description of existing services developed by local government de- partments to one-paragraph policy statements en- dorsed by local elected officials. Base-Ievel-of-service agreements generally protect the local government in the event that citywide budgets or services are reduced-in that case, a proportional reduction may also occur in the BID. Conversely, if citywide bud- gets or services grow, a proportional increase will be allocated to the BID. Base-Ievel-of-service agree- ments can also become a focus of negotiation if ad- ditional services are needed as an incentive to secure the support of property and business owners. The base-Ievel-of-service agreement can be a valuable sales tool for BID supporters during a BID formation petition drive. It should be completed prior to the BID formation petition drive or public hearings before the local council. Developing a base-Ievel-of-service agreement can be an enlightening experience for the local gov- ernment. Many~local governments are unsure of their exact service commitments to a business district un- til they have to quantify them. Ample time should be allocated to coordinate the creation of a base-Ievel- of-service agreement among several local govern- ment departments. - e t Business Improvement Districts: Tool for Economic Development 13 (' ~. Fair-Share Participation A trickier issue for local government revolves around the treatment of government-owned property within a business district. As noted earlier in this report, most BID laws exempt government-owned property from BID assessments; however, many localities agree to voluntary participation through the provi- sion of financial contributions or enhanced services. In most cases, local government's participation is based upon a calculation of its "fair share"-the amount resulting if government property were as- sessed at the same rate as private property. Publicly owned property is just as likely to benefit from BID services as private property-a cleaner, safer, and more vibrant business district will be more inviting for government employees and cus- tomers. There are broader intangible benefits to the community at large if a business district becomes a desirable destination and a source of civic pride. Despite these tangible benefits, the local govern- ment decision to participate in a BID is usually driven by budgetary and political considerations. On the political side, local government participation can be helpful to secure additional private sector sup- port for the BID. By participating, the local govern- ment demonstrates that it is a partner in the BID formation effort and, like its private sector neighbors, is a property owner that shares many of the same goals and aspirations for the business district. Local government participation can also be sold as an important source of leverage for the BID, ei- ther diluting the overall assessment or providing in- creased services. Identifying tangible benefits for the community at large is key, since it might be challeng- ing to sell the notion of BID participation to repre- sentatives from outlying districts. The local government budget will ultimately determine its participation in a BID. It might be more budget-effective to provide extra services as opposed to a cash payment. Various segments of government, such as a redevelopment authority, should be ex- plored as alternatives to the general fund. Regard- less of the type of participation, the fair-share issue should be considered by the local government be- fore the process to form a BID is set in motion. ~ f, -.) \ ,:' ./J O-.~-\ I ,:_ ~ I,'; BID Formation Support Team The BID formation process requires technical sup- port from local government. Local government de- partments that are likely to be mobilized include City attorney, to review the BID service plan for compliance with state and local laws, review the form of BID petition, develop a sequence and timetable to shepherd the BID through the legis- lative process, and, if necessary, monitor the process for assessment elections Planning or public works, to develop BID maps and assist in creating a property and business database · Clerk, to monitor petition or election processes · Engineer, to review the assessment methodol- ogy and submit assessment data to the county or other billing agencies · City manager and mayor's office, to coordinate the process and establish local government par- ticipation policies. Some local governments have established BID support teams that include representatives from each of the departments working on the BID. The BID sup- port team should work with the BID steering com- mittee from the beginning of the process to identify and anticipate support roles. Administering the BID Once the BID is established, the local government will provide a variety of administrative services re- lated to the billing, collection, and transfer of assess- ments. BID assessments are typically billed through existing local government taxing systems. For prop- erty-based BIDs, assessments are commonly billed through the regular property tax bills. The BID as- sessment appears as a separate line item on the prop- erty tax bill. The 13ID assessment also carries the same lien enforcement provisions. This arrangement re- quires close coordination between the city and county governments. The city will be responsible for supplying assessment data to the count}', which then adds BID assessments to the tax rolls. The county collects the BID assessments and transfers them to the city, which in turn transfers them to the BID. Costs incurred by the local government associ- ated with the collection and transfer of BID assess- ments are generally built into the BID budget so that the BID can reimburse the local government. Costs can also be waived and credited as part of the local government's participation. Collection and transfer costs rarely amount to more than 1 percent of the budget of larger BIDs, and no more than 3 percent of the budget of smaller BIDs. A series of intergovernmental agreements will provide the parameters for the various transfers in the BID collection process. The intergovernmental agreement between the local government and the BID will also specify the terms of collection, timing of payment transfers, city fair-share participation, and other financial details associated with the trans- fer of assessments. For tenant-based BIDs (meaning the BID assess- ment is based on the business rather than the prop- erty), assessments are added to business license renewals. Municipal governments are usually the 14 Management Information Service billing agency for business licenses. Generally, ten- ant-based billing procedures lack the enforcement powers provided by liens in property-based BIDs. Billing and collection for tenant-based BIDs are also more costly because of the greater number of ten- ants, smaller assessments, and the difficulty of track- ing them from year to year. Some BIDs collect assessments on behalf of the local government. For example, BIDs in Philadelphia, Pennsylvania, and Birmingham, Alabama, collect assessments through a district managed billing and collection process. Both BIDs claim that collections are more reliable if they manage the process them- selves. The local government's lien authority can still be used for delinquencies. Contracting with a Management Organization While BIDs are private-sector-driven mechanisms, they are still quasi-governmental entities created by a resolution or ordinance of the local government. In most cases, a private sector advisory board will be established to provide recommendations on bud- gets and assessments to the city council. Whether or not the advisory board plays a role in selecting a management organization, the local government will have substantial influence on the choice of an entity to carry out day-to-day serviCE.~'? of the BID. In some cases, particularly for older BIDs in com- munities such as Burlington, Vermont, or Boulder, Colorado, the management organization is a munici- pal department. While government agencies can be effective in delivering BID services, this approach is becoming increasingly problematic. On the func- tional side, the use of BID funds is constrained by government requirements on bidding processes and union labor rates. PoliticallyAt is difficult to sell the BID concept to property and business owners as a private sector initiative if government will eventu- ally deliver the services. It is more common for a private sector manage- ment organization to be contracted to deliver day- to-day services. Typically, the management organ- ization is a private nonprofit organization-under U.S. tax codes, either a 501(c)(3) or 501(c)(6) class- ification. Management organizations take many forms, ranging from an existing merchants' organi- zation to a Main Street program to a multifaceted and sophisticated downtown partnership. While BID advisory board representatives are ratepayers, the management organization should have a broad- based board of directors representing all downtown interests, including local government. To provide certainty and cost efficiencies, the local government should contract with the manage- ment organization for a term commensurate with the life of the BID. This allows the management organi- zation to amortize fixed costs associated with equip- ment and other program needs over the term of the BID. The management contract will also contain a termination clause to allow the local government to switch contractors if BID funds are mismanaged. t") CASE STUD~ES The following case studies provide information on the impact of BIDs in a variety of business districts, including urban and suburban downtowns, tradi- tional Main Streets in smaller communities, and com- mercial corridors developed in the post-World War II era. International examples are included as well. For a summary of information on the BIDs featured in these case studies, see the table on page 19. Urban Downtowns Perhaps the most widely publicized use of BIDs has occurred in the central business districts of our larger cities. Responding to rapidly deteriorating environ- mental conditions and reduced municipal services, many large downtown business communities have rallied around BIDs to create clean, safe, and vibrant districts. BIDs have proliferated in New York City, where more than 30 are now credited with contrib- uting to everything from an economic renaissance to the city's impressive reduction in crime. Philadelphia and Denver provide examples of how BIDs enhance the revitalization of urban downtowns, a formula now being replicated in a number of smaller com- munities such as Hampton, Virginia. fJ Philadelphia, Pennsylvania (population 1,500,000). Philadelphia's Center City District provides the clas- sic case study of a BID's ability to make a business district clean and safe. Responding to deplorable street conditions and a city budget crisis, downtown Philadelphia property '">wners formed the Center City District in 1990. With an annual operating bud- get of $7.4 million, Center City District employs a phalanx of street cleaners and hospitality-trained security guides. The district, which measures linear feet of graffiti, saw an 80 percent reduction in graffiti from 1994 to 1995. Crime rates have gone down dra- matically in the BID, a 25 percent decrease from 1993 to 1995. Philadelphia's BID also employs community- service coordinators who work with street popula- tions to discourage aggressiv~ panhandling and find productive solutions to challenges confronted by the homeless. The same pattern has been evident in other ur- ban downtown BIDs that offer clean and safe initia- tives, including New York, Baltimore, Houston, and Portland, Oregon. Street janitors and guides become the eyes and ears of local police, deterring crime and, perhaps most important, increasing the perception of safety among the people who are downtown's pri- mary customers. ~\ .) Business Improvement Districts: Tool for Economic Development 15 Center City District's executive director, Paul Levy, sees an increasing role for BIDs in urban down- towns into the next century: "The changes in poli- cies at the federal level-decreased levels of funding to cities and welfare reform in particular-will have a tremendous impact upon our urban areas. While the Philadelphia Center City District will maintain its operational foundation of clean and safe initia- tives, more and more we will be involved with other organizations in a strategic planning, advocacy, and traditional economic development role." Denver, Colorado (population 490,000). Downtown Denver's $2 million BID supports a holistic approach to urban downtown management that is being rep- licated in other major cities. Beyond clean and safe, the Denver BID provides financing for a variety of marketing events and economic development pro- grams to activate the central business district. Denver's BID was originally formed to maintain a transit mall that was constructed in 1982. The origi- nal maintenance district expired in 1992 and was re- placed by a BID with a broader scope of activities. In the early 1990s, Denver's downtown was strug- gling to recover from a prolonged economic reces- sion that saw its four department stores depart and office vacancy rates soar. A major component of the Denver BID includes funding for both consumer "and investor marketing programs. Consumer marketing includes down- town-wide advertising and promotions to convey a positive image and pitch the collective vitality of downtown's various attractions. The BID contributes about $400,000 annually to this effort, which is le- veraged five-fold by private businesses and the city of Denver. Quantifying the results of this program, Denver's downtown has seen its sales receipts in- crease despite the loss of its department stores. The Denver BID's investor marketing program aims to bring new businesses and investment to the central business district. The program is oriented at supporting property owners and brokers with down- town market information and trouble-shooting with local government to resolve code and other regula- tory issues. While the underlying office market has become stronger, the Denver BID effort has provided valuable tools to help property owners and brokers reduce vacancies from a peak of 31 percent to today's 12 percent. Future priorities for the Denver BID include in- creased participation in managing downtown parks and a stronger role in finding productive means to reduce a growing street population. ';" 11 ~4 Winnipeg, Manitoba, Canada (population 650,000). The Downtown Winnipeg Business Improvement Zone (BIZ), established in 1989, is governed by a 17- member management board. Fifteen members are elected annually by businesses in the zone, and two are city councilors appointed by the city. Funded primarily through a levy on the annual rental value of each business in the zone, the BIZ leverages ex- tensive support for its programs through govern- ment contracts, business sponsorships, and volunteer efforts. An example of its success in establishing true public/private partnerships is the close cooperation between the BIZ and the Winnipeg Police Service. The BIZ helped to establish two police storefront offices downtown and covers some of the operating costs of one office. Its Downtown Watch team, which is funded jointly by the BIZ, the city, and corporate sponsors, operates out of the other. These" good-will ambassadors" do not carry weapons or make arrests, but are connected by two-way radio with the Winnipeg Police Service and have been trained in observation and reporting techniques. In the spring and summer months, a BIZ Patrol of students clad in neon green uniforms sweeps sidewalks and plants and cares for flowers. Down- town businesses that take special pride and care in the maintenance of their properties are recog- nized by the BIZ Patrol with the "Order of the Neon Broom" award. The BIZ also funds a two-person Grime Stoppers crew, which is recruited and super- vised by the city's works and operations department to patrol and clean up downtown back lanes. Under the Easy Streets™ program created by the BIZ, businesses can purchase $1 parking tokens to give to their customers. The tokens are redeemable in city parking meters, at over 80 downtown park- ing lots, and with several taxi services. The BIZ has addressed other transportation issues, lobbying suc- cessfully to reintroduce two-hour free metered park- ing on Saturdays and contributing to the operating costs of a shuttle bus connector service. Hampton, Virginia (population 140,000). Taking the lead from successful BIDs in larger cities, many smaller communities are now forming BIDs in their traditional central business districts. Hampton, Vir- ginia, formed a downtown BID in 1996 at the same time that a second Hampton BID was formed along a commercial corridor. The Downtown Hampton BID generates $158,000 in annual assessments and will help finance a variety of physical improvements, marketing and economic development initiatives, and waterfront enhancements to make downtown more vital. The BID formation effort provided a much need- ed boost to downtown revitalization efforts, over- coming negativity and apathy. June McPartland, di- rector of marketing for the city of Hampton, indicates that "the city is supportive of grass roots efforts by the business community to form BIDs. We realize that our economic vitality is based upon a partnership between the business community and the city-the city can't do it alone." 16 Management Information Service t'" ,jl '1* .' ). Ji , ~l l Business Improvement Districts: Tool for Economic Development 17 Suburban Downtowns Originally oriented toward marketing and promo- tions, suburban BIDs are increasingly used to sup- port economic development and redevelopment initiatives. Aurora, Illinois (population 117,000). Established in 1974 through Illinois' Special Service Area legisla- tion, the Aurora BID was formed to support a tax increment financing district and a city redevelop- ment program. Revenue from riverboat gaming has also been instrumental in financing downtown im- provements. As Aurora has developed new infra- structure and projects in its downtown, the BID has evolved to become more of an asset manager, pro- viding maintenance, marketing, and tenant recruit- ment. The BID's most recent achievements are measured by decreased vacancy rates and an im- proved overall image for the business district. Elinor Luse, director of the Aurora BID, cites the organization's ability to provide a single point of contact on downtown issues as its most significant impact: "We serve as the focal point for both exist- ing and new businesses." ) Tempe, Arizona (population 155,000). Formed in 1994, the Tempe BID aims to keep the downtown competitive amidst burgeoning regional growth in the Phoenix metropolitan area. Annual assessments amounting to $236,000 plus funds from other sources support programs that include public safety, market- ing, parking management, and future development planning. During its first three years, the BID has helped attract 42 new businesses to downtown. The area has experienced a significant increase in -retail sales. The Tempe BID has financial participation from both the city and Arizona State University in the form of fair-share contributions-each institution pays an amount commensurate with what they would be as- sessed if they were private property owners. The city and the university also sit on the Tempe BID's gov- erning board. Main Streets For small communities, a BID can be a valuable tool to sustain a local revitalization program, whether it is sponsored by the National Main Street Center or is an independent effort. A BID can be a source of reliable revenue and can relieve program managers from time-intensive fund raising. Burlington, Ver- mont, and McMinnville, Oregon, provide examples of BIDs in smaller communities. ,\ Burlington, Vermont (population 40,000). The Burlington BID was formed in 1979 to maintain and promote the Church Street Marketplace, a four-block pedestrian-oriented corridor wit~ specialty retail ~nd entertainment uses. The Burlington BID raIses $380,000 annually to fund ongoing maintenance, marketing and promotions, and management of the marketplace. BID programs are credited with help- ing to stabilize rents and maintain occupancy rates at 95 percent. Services for the Burlington BID are provided by the Church Street Marketplace District Commission, a department of municipal government. Although the BID is financed entirely by private sector assess- ments, public management of the space has worked well because those involved are able to influence public policies that affect operations and develop- ment. The marketplace's executive director, Molly Lambert, sees that maintenance issues will continue to dominate the BID's budget over the next several years. Lambert adds .that short-term ch~lleng~s in- clude enhancing publIc safety and engagIng nahonal tenants in the design and implementation of market- ing programs. McMinnville, Oregon (population 22,000). Located in the heart of Oregon's rapidly growing wine coun- try, McMinnville's BID was created in its central busi- ness district as an Economic Improvement District in 1986. The McMinnville BID raises $54,500 in an- nual assessments, providing revenue for a mature Main Street program. Primary uses of funds include marketing, design assistance, economic restructur- ing, and program management. Measurable results from the BID include increased occupancies and sales. The business district is also attracting new resi- dents to the upper floors of commercial buildings. The city of McMinnville provides a direct annual contribution of $12,000 to the BID and collects BID assessments with no administrative fee. A future priority for the BID will be capitalizing on McMinnville's growing popularity as a tourism des- tination because of its local wine industry. Commercial Corridors The latest application of BIDs is appearing along lin- ear commercial corridors. Dating back to the 1950s and 1960s, these corridors are often first ring sub- urbs that housed early shopping malls. Market share is rapidly eroding as second- and third-ring suburbs offer newer malls and large discount centers. Many first-ring suburbs are also experiencing eroding in- come demographics as affluent households move away. Hampton, Virginia (population 140,000). Estab- lished in 1996 at the same time as the downtown BID, the Coliseum Central BID encompasses nearly 1,800 acres along a major commercial corridor. The annual $136,000 in assessments will help implement 18 Management Information Service a community improvement plan that includes en- hanced security, marketing, special events, and long- range planning to revitalize the corridor. Similar to more conventional central business district BIDs, the most significant impact of the BID formation effort has been unifying diverse business interests along the corridor. According to BID direc- tor Peter Gozza, liThe business community came to- gether in this process. They no longer look at just their own property without thinking about the col- lective potential of the entire district." South Sacramento, California (market area of 200,000). Once the premier shopping destination in Sacramento, the Florin Road corridor has fallen on hard times. Major business interests along the five-mile corridor include a 1960s-era shopping mall, several automobile dealerships, and a retail/ enter- tainment center. The area has sustained substantial erosion in its market share and image over the past 15 years. Florin Road is the first commercial corridor that proposes to take advantage of new property-based BID legislation that was adopted in California in 1994. Six property-based BIDs have been formed, including one in downtown Sacramento. More than two dozen are under development through- out the state. The Florin R<;>ad BID is expected to raise $250,000 in annual assessments for street beautification, marketing and promotion, mainte- nance, and security. The Florin Road BID is unique in that it runs through both city and county jurisdictions. Accord- ing to Florin Road BID director Sean Rooney, the BID formation effort has already been successful in el- evating the profile of the area to both governments. International Applications While BIDs remain largely a North American phe- nomenon, interest in their application in other coun- tries continues to grow. The model has been adapted as part of efforts to revitalize downtowns in Kingston, Jamaica, and Johannesburg, South Africa, and their use is currently being explored in other parts of the Caribbean and Africa, as well as in the United Kingdom and Australia. In a short period of time, the BIDs in Kingston and Johannesburg have had remarkable success in tackling II crime and grime" and in changing the pub- lic perception that downtown is unsafe and dirty. They have contributed to economic development ef- forts by generating new jobs for local residents. They continue to expand their activities into new areas such as marketing, streetscaping, and business reten- tion and attraction. Johannesburg, South Africa (metropolitan region population 6,000,000). A major world city and the financial center of the Southern Africa region, Johannesburg is experiencing many of the same trends as western cities: decentralization of retail and office space, growing crime, and a concentration of poorer residents and high unemployment rates in the inner city. In early 1992, the Central Johannesburg Partner- ship (CJP) was founded as an alliance of the busi- ness sector, community, and city council to develop common solutions to the city's pressing problems. In early 1996, following the first democratic munici- pal elections in South Africa, the CJP was restruc- tured to represent the business sector, but it continues to work closely with community groups and central and local authorities on issues ranging from hous- ing and homelessness to economic development. The CJP studied practical solutions to urban de- cay and management used in other cities around the world, and concluded that the most appropriate model for central Johannesburg was the BID model. In August of 1995, it established the Central Improve- ment District (CID), an area that includes two major hotels. In September 1996, it added the South-West- ern Improvement District (SWID), home to several major banks and the offices of the Gauteng provin- cial premier. The CJP plans to launch two more dis- tricts in 1997. The CID and SWID are governed by boards elected by property owners (local authorities were invited to serve on the boards but initially declined). Day-to-day operations are,overseen by a BID man- ager. The improvement districts are funded by a vol- untary levy on property owners and, like BIDs in the U.S. and Canada, have focused their initial efforts on improving security and cleanliness. Each district has a uniformed private security force-unarmed officers wearing brightly colored uniforms who patrol the streets. T~ey are trained (with CJP funds) to help tourists by giving directions and local information and rendering first aid. They are connected by radio to several armed motorcycle officers, a central CJP control room, and the police, so that they can alert the authorities to suspicious activities and make citizen arrests. Their visible pres- ence has contributed to an impressive decline in crime levels in the CID and SWID: muggings in the CID area, for example, have been reduced by 90 per- cent. Officers also provide escort services for office workers and tourists in the districts. The CJP contracts with a small cleaning service (which it helped establish with the cooperation of the Soweto Council) to provide supplemental street cleaning. Cleaning crews sweep sidewalks, empty lit- ter receptacles, remove illegal graffiti and posters, and paint traffic lights and street signs, contributing to a visibly improved environment for workers, shoppers, and tourists. . Building on its successes, the CJP BIDs are beginning to address new issues. They are working ,~, ;1 /' Business Improvement Districts: Tool for Economic Development 19 " \ 20 Management Information Service with the informal traders who make up an -impor- tant part of the economic activity in inner Johannes- burg. Joint marketing and streetscape initiatives and the introduction of closed-circuit TV (CCTV) are also planned. The eJP BIDs continue to rely on voluntary assessments, and in the CrD, 95 percent of businesses (as determined by property rate values) contribute. However, at the request of the Gauteng provincial government, the CJP has drafted a Uwhite paper" on enabling legislation to permit mandatory self-assess- ments. The legislation is currently being considered by the provincial parliament. Kingston, Jamaica (population 600,000). The eco- nomic vitality of downtown Kingston, Jamaica, is being challenged by the growth of rival suburban business and shopping districts, political violence, disinvestment, and a decline in the level of public funds to support basic urban services and infrastruc- ture. In 1986 the United States Agency for Interna- tional Development (USAID) funded an urban rede- velopment project to revitalize and generate jobs in the downtown area. USAID funds were used to upgrade infrastructure systems and support the ac- tivities of the Kingston Restoration Company (KRC), a public purpose, private, nonprofit development company established by the b;usiness community in 1983. KRC has been involved"in real estate develop- ment and land assembly, community development projects, and facade and street improvement. In 1995 a group of downtown merchants created the Downtown Kingston Management District (DKMD) to give more support to KRC's revitaliza- tion efforts. The DKMD was established to deal with the specific problems of the downtown's principal wholesale and retail shopping blocks. These included a concern about crime (real and perceived), dirty streets and sidewalks, large numbers of uncontrolled street vendors, and the poor image of downtown as a commercial center. In less than two years the DKMD has had a re- markable impact on the cleanliness of its service area. Streets and sidewalks are swept daily. Litter bins have been placed throughout the area and green spaces are maintained. Most of the street vendors have been relocated to formal vending sites. A multi- media marketing effort has been initiated. To gener- ate income the DKMD is developing a commercial garbage collection business. In December 1996 the DKMD created a courtesy corps to provide informa- tion to pedestrians and additional public security. The DKMD has forged an effective working re- lationship with the government of Jamaica, the city government, and KRC. National legislation is now being considered to permit the establishment of busi- ness improvement districts that would be authorized to collect self-imposed taxes to fund the DKMD and other similar organizations in Jamaica. The DKMD is organized as a nonprofit private organization and is supported principally by mem- bership dues and service contracts. It has an admin- istrative staff of three, a team of fifty street sweepers who have been recruited from surrounding low in- come areas, and a courtesy corps of twelve funded by the government but managed by the DKMD. Its current annual budget is $330,000. 1 Lawrence O. Houstoun, Jr., "Are BIDs Working?", Urban Land (January 1997). RESOURCES Organizations International Downtown Association 915 Fifteenth Street, N.W. Suite 600 Washington, DC 20005-2375 202/783-4963 National Main Street Center 1785 Massachusetts Avenue, N.W. Washington, DC 20036 202/588-6219 International City /County Management Association International Municipal Programs 777 North Capitol Street, N.E. Suite 500 Washington, DC 20002-4201 202/962-3516 The Urban Land Institute 1025 Thomas Jefferson Street, N.W. Suite 500 West Washington, D.C. 20007 202/624-7100; fax 202/624-7140 General Services Administration For more information on the General Services Adminis- tration's (GSA) "Good Neighbor Program," contact your regional GSA Office. New England Region - 1P 10 Causeway Street Boston, MA 02222 617/565-5693 Northeast & Caribbean Region - 2P 26 Federal Plaza New York, NY 10278 212/264-4282 Mid Atlantic Region - 3P 100 Penn Square East Philadelphia, P A 19107 215/656-5655 Southeast-Sunbelt Region - 4P 401 West Peachtree Street Atlanta, GA 30365-2550 404/331-5129 Business Improvement Districts: Tool for Economic Development 21 Great Lakes Region - 5P /"' 230 South Dearborn Street V Chicago, IL 60604 312/353-5572 The Heartland Region - 6P 1500 East Bannister Road Kansas City, MO 64131 816/926-7231 Greater Southwest Region - 7P 819 Taylor Street Fort Worth, TX 76102 817/978-2522 Rocky Mountain Region - 8P Building 41, Denver Federal Center Denver, CO 80225-0006 303/236-7245 Pacific Rim Region - 9P 450 Golden Gate A venue, 5th Floor San Francisco, CA 94102-3400 415/522-3100 Northwest/ Arctic Region - lOP 400 15th Street, SW GSA Center Auburn, W A 98001 206/931-7200 National Capital Region - NCR 7th & D Streets, SW Washington, DC 20407 202/708-5891 Publications Downtown Idea Exchange, a bimonthly publication sharing progr~m ~nformation from downtown management organIzatIons and BIDs throughout North America. Published by Alexander Research & Communica- tions, Inc., 215 Park A venue South, Suite 1301, New York, NY 10003. Telephone (212) 228-0246. Are BIDs Working? by Lawrence O. Houstoun, Jr., in the January 1997 issue of Urban Land, published by the Urban Land Institute. Business. Districts Revisited, in the January 1997 issue of Mazn Street News, published by the National Main Street Center of the National Trust for Historic Pres- ervation. Business Improvement Districts, by Lawrence O. Houstoun, Jr., in the Spring 1996 issue of Economic Development Commentary. Downtown Renewal: The Role of Business Improvement Dis- tricts, by Richard Bradley, in the February 1995 issue of Publzc Management, published by the International City /County Management Association. Betting on BIDs, by Lawrence O. Houstoun, Jr., in the June 1994 issue of Urban Land, published by the Urban Land Institute. ~(~K <f!' States by region: lP - CT, MA, ME, NH, RI, VT 2P - NJ, NY 3P - DE, MD, PA, VA, WV 4 - AL, FL, GA KY, MS, NC SC, TN SP - IL, IN, MI, MN, OH, WI 6P - , KS, MO, NE 7P - AR, LA, NM, OK, TX 8P - CO, MT, ND, SD, UT, WY 9P - AZ, CA, HI, NV 10P-AK, !D, OR, W A NCR - Washington, DC Metro Area Contacts Outside the U.S. Downtown Kingston Management District Winsome Wilson, Works Manager 113 Water Lane Kingston, Jamaica 809/967-2777; fax 809/922-7852 Central Johannesburg Partnership Neil Fraser, Executive Director CC Box 99-010 Carlton Centre Johannesburg 2001 South Africa 27-11-331-2851; fax 27-11-331-5161 Downtown Winnipeg Improvement Zone Harry Finnigan, Executive Director 1506 - 330 Portage Avenue Winnipeg, Manitoba, R3C OC4 Canada 204/943-5706; fax 204/944-8360 E-mail: dntn-biz@cyberspc.mb.ca